Your Weekly Update, Dialing Down Risk A Bit, And Let's Talk Some More About Gold

In this weekend's video update I talk about dialing back risk a bit, opportunity at the margin, why gold's been a real drag of late and why the long-term setup remains constructive. 

Morning Note

As I've expressed on recent video commentaries and in client meetings, the core adjustments we've made over the past several weeks have been primarily focused on adding to our defensive sector exposure (read consumer staples), raising our cash level and increasing the support mechanism expressed by our use of SP500 options... I.e., dialing back the portfolio's volatility a bit for what should be obvious reasons.

Now, you wouldn't necessarily know it by today's action. 

Although, that said, as I type we're capturing just over half of the SP500's decline, and only 31% of the Nasdaq's hit... Thing is, those two indices are down 1.87% and 3.70% respectively.. So, yes, we're definitely feeling it today.

The relief we're getting is coming from our increased cash level, healthcare, staples and of course our SP500 put options... But, oddly enough, gold is not providing the support one might anticipate given the action we're seeing across all asset classes; which has been largely the case the past several weeks.

I believe the following does a good job capturing what underlies these short-term dynamics, while putting it all in its proper long-term context: 

Quick Note on The Fed

There'll be no rate hike announced after today's Fed meeting, so it's all about the statement and the press conference.

As I've expressed herein of late, while the Fed has to sound tough on inflation, the short-term nature of the problem is largely (there are other factors) about passing-through-higher-prices-to-the-consumer due to a supply shock (read oil), or perhaps the risk of a further supply shock that's presently priced into everything petrol.

So, at first blush, one would think that a hawkish Warsh would be bullish for the dollar, net-bearish for equities, as well as precious metals and other commodities.

Notice I didn't say net-bearish for bonds... Not that it won't be, likely may, but, frankly, it perhaps shouldn't be... Meaning, an aggressive Fed looking to tighten financial conditions into a supply shock is uber-dangerous from a broader economic perspective... Which, all else equal, could very well have investors bidding up (yields down) the long-end of the yield curve out of fear that the Fed will live up to its historical rep as the ultimate expansion killer.

Now, that said, our longer-term position remains that -- while indeed there may be yet another hike or two on the near-term horizon -- the structural playbook is to suppress at least the short-end of the curve (where the treasury will be doing the bulk of its borrowing) and to inflate the economy's way out of the daunting headline debt/GDP ratio over multiple years going forward.

Let's face it, fiscal restraint is in no way whatsoever on the cards, whoever wins in 2028!

As for next week’s midterms, a split Washington is the likeliest outcome, and gridlock cuts both ways: no new stimulus, but no austerity either... The deficit is on autopilot (entitlements plus a rising interest bill), so nothing coming out of Congress changes the math... Expect debt-ceiling and funding brinkmanship in 2027 instead.

The Setups That Matter, Long-Term -- And Your Weekly Macro Roundup

This weekend's video commentary will take more than one NFL halftime, start to finish, but, clients, this is absolutely one you'll want to take in (start to finish).

Quick Note

One more quick commentary before this weekend's macro assessment.

Suffice to say that markets (from bonds to precious metals) are reflecting notable uncertainty... My reference yesterday to the economically-defensives (staples, healthcare, long-term treasuries) rallying against very negative action in virtually all other corners, has flipped on its head... I.e., yesterday's winners are -- along with virtually everything save for the energy-related space and, ironically, tech [flat after yesterday's drubbing] -- today's losers... Gold glimmered a bit at the open, but even it has rolled over (down 1%) as I type.

Of course, any or all of the above, given the present environment, may have reversed by the time you receive this.

So how to think about all this on an October Friday? As I chatted to our team this morning, I am macro-ambiguous in the very short-term... Meaning, there are sufficient macro and market cross-currents -- which I know I don't need to list for you right here -- to make the short-term trader (that's not us, btw) utterly dizzy, I'm certain.

But, like I said yesterday:

"...while we forever assess short-term dynamics (separating signal from noise) as we test our theses (and as we determine whether any tactical and/or additional hedging action makes sense), make no mistake, our strategy will always reflect our longer-term structural view on global macro realities."

Stay tuned…. 

Quick Note

Just a quick note followed by a brief macro update while away from the office this week...

A modest gain in our core allocation on the week is giving way this morning to broad selling in virtually everything growthy, including commodities and our non-US equity exposures... All else the same, the one intuitively-speaking surprise is the 2% drubbing gold is taking as I type.

Here's our tentative view on the action in gold taken from the synopsis below... "Since inception" refers to when we added it to our core allocation:

"GLD is -1.9% on a day when the long end is rallying and the dollar is only +0.16%. Gold is being sold as a funding source, not on its macro drivers. With GLD at +125% since inception, it’s the obvious place to raise cash."

We're noting some interesting breakdown in this year's correlations across certain asset classes -- as, with regard to rates and oil in particular, I pointed out in last weekend's video.

Suffice to say that markets are beginning to -- for the moment -- price the economic threat posed by high energy prices and a newfound fear that the AI-spending train may have already run its course... While the latter is without doubt an ultimate potentially-serious economic and market headwind, we remain skeptical that the day is yet upon us.

That said, the latest action in markets is consistent with typical late-cycle dynamics.

Note -- supporting the economic headwind view -- the following core positions action this morning:

XLP (consumer staples) +2.58%,  XLV (healthcare) +1.37%, TLT (Long-term treasuries, which we have a call option on) +1.27%... Again, the position you might otherwise expect to be doing well this morning is GLD (gold), down 2%... While there are a few other pockets of relative strength in our core mix, suffice to say that there's not enough there to fully offset the drubbing in tech-related, non-US and commodity exposures on the day so far... Of course, while we forever assess short-term dynamics (separating signal from noise) as we test our theses (and as we determine whether any tactical and/or additional hedging action makes sense), make no mistake, our strategy will always reflect our longer-term structural view on global macro realities. 

I'll offer up a more robust analysis of all things macro over the weekend.

Stay tuned...

The Fed 'Potentially' Adding Insult to Injury -- And Your Weekly Macro Update

In this week's video prelude we'll explore last week's inflation numbers, the latest action in oil and its rocky relationship with interest rates, and, among other things, an under-the-surface look at what's really troubling markets of late.

The Problem

My schedule today only allows for a quick pre-market note... So just quickly touching base on this morning's CPI report and my thinking around the whole inflation conversation.

Immediately upon the report coming in hotter than expected stocks went from nicely green to notably red in pre-market action... Tech and financials look to be taking the brunt of the hit so far... Precious metals getting pretty well hammered.

Fed funds futures immediately went from essentially pricing in no rate hike at this month's meeting, to a 50/50 chance... A December hike fully priced in.

In terms of the inflation problem itself, while we think higher (than recent years') inflation is a structural reality going forward, at the moment we see it as a supply problem much more so than a demand problem, which, therein, lies the problem.

I.e., the Fed speeding up the tightening of financial conditions by raising short-term interest rates is taking aim at demand (which, btw, is the only target they have -- as they can't print oil, for example, and they can't reduce trade barriers [read tariffs]).

So, while you'll hear commentary aplenty about how the Fed needs to get more aggressive, watch what happens to inflation expectations, and ultimately the near-term numbers, when a durable Middle East solution is found and if/when trade tensions seriously ease.

The former (in terms of safe passage of oil tankers) being an inevitability over coming months, the latter is less certain.. In either case the precise timing is up in the air.

Stay tuned, I'll have much more for you over the next few days.

Why the Ecoonomy's OK Despite Consumer Surveys & Other Serious Stuff

Definitely a must-watch video for clients!

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:

Businesses Steady, Households Strained*

Week of October 5, 2026

Unreal That the S&P Hit an All Time High Yesterday, Literally Unreal (video)

Dear Clients, here's another (this one's short) video we'd like you to be sure and take in.

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:

Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.

Twists and Turns

Per yesterday's video, September was the first truly ugly month for markets since March... But now we enter a period that, even during past mid-term election years, tends to be a very good stretch for asset prices.

Of course this year's setup has more to contend with than simply domestic politicking!

For the moment, save for a yet-unconfirmed attack on an Aramco oil facility, the latest (weekend) news flow has been notably tame, relatively-speaking.

As I've pointed out, the US administration is in the eleventh hour if it intends to pull a few market levers to catch a wealth-effect edge heading into election day.

Scott Bessent taking the treasury bond buyback to its stated upside limit last week, plus Europe's giving the nod to the US's request to unleash a meaningful amount of diesel (in particular) reserves suggests that they've yet to give up on juicing market forces to perhaps sway the on-the-fence voter come early November.

Perspective on September's Swoon (video)

Dear Clients, please be sure to take a few minutes and take this one in.  Thanks!

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:

Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.

We Remain Uber-Bullish On Gold (Long-Term)

Gold has been interesting to track of late... It's a not-small position for us that, since we added it, has been very profitable to own -- until this year, that is, and certainly until the past month or so.

GLD YTD:

Turbulence

Per Sunday's video, there's notable turbulence occurring just below the equity market surface.

Along with the concerning breadth readings we covered, as I type nearly 2/3rds of S&P 500 constituents are experiencing a technical bear market (down 20%+ from previous highs)... I.e., stocks -- save for the tech sector -- are struggling mightily as we enter Q4.

So what's going on?

Well, as I illustrated in my 9/23 chart pack, oil is largely running the show.

Here's Bloomberg:

"Global Equity Weakness — Late September into October 2026

The Common Thread: Oil Amplifying a Bond Market Rout

Two forces are working in tandem to pressure equities globally: a relentless rise in sovereign bond yields and an oil price that is flirting with $100/bbl. Brent crude is up ~2.5% today to around $100.49, having risen for a third consecutive month, driven by Middle East supply disruptions tied to the US-Iran conflict. Critically, oil is not just a cost headache — it is actively feeding the bond selloff by stoking inflation fears, which in turn pushes yields higher and compresses equity valuations. US 10-year Treasury yields have touched their highest since 2002 at ~5.30%, while 30-year Gilt yields have surged to 6% for the first time since 1998."

As for this morning specifically:

"US: Oil Erasing the AI Rally

The dynamic in US equities is stark. S&P 500 futures wiped out an advance of as much as 0.7% — driven by an upbeat Micron forecast — as the renewed oil climb deepened the bond selloff. (1) ISM manufacturing data this morning showed a gauge of raw-material prices jumping to its highest since May, amplifying inflation anxiety and sending the S&P 500 on track for its worst week since August. (2) A gauge of big banks lost 2%. (3) Beneath the surface, the equal-weighted S&P 500 is eyeing its seventh consecutive weekly loss — a streak seen only twice before in history — even as AI-linked megacaps hold up. (4) Oil is a key reason for the divergence: energy costs squeeze the broad market while tech remains relatively insulated."

I'll have lots to share on the topic over the weekend. 

Quick Note: Volatility notwithstanding

Just thought I'd pop in with a quick note, given the pain markets are feeling pretty much across the board this morning.

I say "pretty much" because of course anything tied to the culprit of late is catching a bid... I.e., oil-related stocks, in the aggregate, are up 2/3rds of a percent, while the likes of industrials, materials, tech, communication, financials and utilities are all seeing drawdowns of between 1 and 1.5% as I type.

Long-term bonds (which we do not own, but are a tell on conditions) are getting hammered this morning as well... As are precious metals (which we do own) to the tune of minus 4-5%.

This is a stark reversal of the rallies we experienced on Friday, which essentially tells you all you need to know for now.

That is, on Friday there were high hopes of a near-term respite that would open the straight of Hormuz... While today, those hopes have -- for the moment -- been dashed.

Make no mistake, the US/Iran affair is something that cannot persist indefinitely, at least to the extent that it chokes oil supply sufficient to -- for one example -- keep gasoline prices double what they were to start the year... And of course this is all doing a major number on the Iranian economy.

I.e., an oil-emphasized resolution is in the offing, but the market is pleading for it sooner than later.

We'll keep you posted on these short-term developments (lots of it noise), while prudently and painstakingly keeping our focus on the structural dynamics that when properly understood -- short-term volatility notwithstanding -- make for long-term investment success.

PS: Dear clients, if the recent volatility -- or, say, the latest news headlines -- are at all getting under your skin, and our next review meeting is farther out than you'd like, don't hesitate to drop me an email, there's always room to schedule a call.

Good News Has a Price

Our weekly macro report below gives the interested reader plenty to digest... And while all of it is important, well... imperative (for us), to forever monitor and assess, if I were inclined to nutshell it for you, at present I'd say you can sum up what's sustaining the US economy's strength at this late-cycle juncture as simply AI datacenter capital expenditure/investment plus the general wealth effect that has those with means spending like the good times will never end.

Headlines and Charts of The Day

As I noted yesterday:

"As for the Iran situation, while both sides have engaged in negotiations over the past week, and during the UN session, their respective speeches at said session did anything but assure markets that a deal is close at hand... Although that -- in terms of agreeing to at least a short-term respite -- can change in a heartbeat, as we've experienced."

Headlines a few minutes ago: 

Quick Morning Note

Per yesterday's message herein, the very recent action in markets has been virtually across-the-board risk-off... Although, while this morning we're once again seeing weakness in the major global equity averages, in commodities (including precious metals), and bigly in bonds, our US healthcare, communications and of course energy (as oil continues its ascent) are offsetting a bit of the pain so far this morning.

Suffice to say, September is thus far fulfilling its historical role as the worst month of the year for markets, reflected in the broader equity averages (such as the S&P 500 equal weight) in particular.

Today's Chart Pack: Oil Runs the Show!

Rough day for markets today, pretty much across the board... I.e., your most diversified portfolio took an outsized one-day hit as everything from global equities, to bonds, to precious metals got escorted to the woodshed:

What We're Watching -- And Your Weekly Macro Wrap

Clients and regular readers will note that as recently as, say, a month (or less) ago, I was firmly of the mind that the Fed would not hike rates anytime soon... A view that markets demanded that I reconsider just ahead of this week's Fed meeting.

Here's from my commentary on Tuesday, where I referenced my commentary from the previous Friday: